Johnsen: Instant Racing to Boost Industry

The president of Kentucky Downs says action by the Kentucky Horse Racing Commission July 14 approving a new form of exotic wagering that uses electronic machines will provide an economic and morale boost to the track in Franklin and the state’s horse industry.

Advent of the new type of wagering is viewed as a positive step toward helping stem the downward spiral in purses within Kentucky racing, which has been unsuccessful in its repeated attempts to have casino-type gaming or video lottery terminals approved for the racetracks. The Kentucky tracks and others within the state’s racing and breeding industry have cited competition from tracks in neighboring states that have purses boosted by casino-type gaming as a reason for a decline in the number of horses racing in the Bluegrass state and a related drop in purses.

“This industry can’t afford to wait,” said Johnsen, who is a partner in Richland Hills breeding farm. “I own race horses and I own part of a track. So I know it from all angles. We have got to get some economic improvement. The fact that we could be on the front of that, for somebody like me who has been in the industry my whole life, I am honored. I am very excited about that.”

Johnsen said Kentucky Downs is committed to spending up to $3 million to implement Historic Race wagering, including the hiring of 85 new employees. That figure also includes the cost of physical improvements to the track as well as acquiring and installing 200 machines for the new wager.

The track executive said the new form of gaming would be offered seven days a week, with a 16-hour per day schedule for weekdays, and 20 hours daily on weekends (Friday to Saturday, Saturday to Sunday). Johnsen could not provide a specific timetable for when the machines would begin operations, but said it would be prior to the track’s 2011 four-day meet that begins Sept. 10.

In addition to offering the historic races, Johnsen said having the new form of wagering would also permit the track to be open for simulcasting seven days a week, compared with the four-day week schedule it currently conducts simulcasting.

Regulations governing Historic Race wagering took effect July 1 in Kentucky after a second legislative subcommittee opted not to address the rules. The machines resemble video lottery terminals but are considered pari-mutuel in nature because the outcome of video games rely on previously run horse races. The rules fall under the KHRC.

Johnsen said a lot of the details, including what the amount of takeout would be from each Historic Race wager, have yet to be firmed up. He estimated the takeout to be about the 8.5% figure on Instant Racing in Arkansas.

Johnsen said it is estimated that the implementation of Historic Race wagering would allow Kentucky Downs to increase its purses from its current level of an average of about $150,000 for each of the four days it races. He said the track is estimating that purses could average $250,000 in 2012 and that the track is planning to add two racing days next year, with the possibility of racing an even longer meet in the future.

Also, given the limited race meet at Kentucky Downs, the track has entered into an arrangement with the Kentucky Horsemen’s and Benevolent and Protective Association that any money accruing to purses above what the track is earmarking for its own purses, could be used to benefit the purse structures at other tracks in the state.

“We feel it’s important to improve the purses on the year-round circuit,” Johnsen said.

Johnsen said Kentucky Downs is being conservative as it phases in the new gaming, noting that “our goal is to provide outstanding customer service so we want to do everything we can to increase the revenues for the industry.”

In addition to Kentucky Downs, Ellis Park in Henderson, Ky., is exploring implementation of Instant Racing, said track president Ron Geary. The track executive said there have been no specific plans made by Ellis since the track is currently conducting its live race meet that ends Sept. 5. But he said Ellis would likely proceed with an application along the lines of the one approved for Kentucky Downs. He estimated Ellis would also likely phase in the new wagering with an initial 200 machines.

Johnsen and Geary both said they are confident the horse industry is on solid legal footing in moving ahead with Instant Racing, although there is a court challenge that could go against the tracks.

The state Supreme Court earlier this year was asked by the KHRC, eight racetracks, and the state Department of Revenue to rule on Instant Racing, but it opted to send the appeal to the Court of Appeals, which has yet to issue a ruling. The state Attorney General’s office last year issued an opinion that Instant Racing is pari-mutuel, and the circuit court followed with a ruling upholding the wager.

“If there is an adverse ruling, we will just shut them down,” Geary said about the possibility of implementing the machines and then receiving an unfavorable ruling. Considering all the legal work that has gone on so far, however, Geary said he is confident Instant Racing is legal.

Representatives of The Family Foundation, which has opposed the new wager in court, said after the meeting that Instant Racing is a form of electronic gaming that is illegal in the state.

“You can shuffle the money around all you want behind the scenes, but it doesn’t make those wagers pari-mutuel,” said Kent Ostrander, executive director of The Family Foundation. “If I were a betting man, I would say it is unwise to install these machines.”

Ostrander said the KHRC’s actions July 14 represented a conflict of interest since the regulatory body was involved with the racetracks and revenue department in the court actions over Instant Racing. He said the actions are in conflict with the executive branch ethics rules.

Ostrander said his organization believes expanded gaming has a negative effect on families, but that The Family Foundation supports the horse industry.

“We are for the horse industry,” Ostrander said. “We would love to see the horse industry prosper. But we are not interested in seeing simple little steps, people turning a blind eye and allowing a major expansion of gambling to creep into the state without the laws being changed.”

The Kentucky Equine Education Project pushed for passage of the Instant Racing regulations and issued a statement from executive director Patrick Neely after the KHRC meeting.

“As we have seen in Arkansas, historic racing has been able to contribute millions to purses at Oaklawn Park and to the Arkansas breeders’ program,” Neely said. “Kentucky Downs is also preparing to hire up to 85 new employees at its facility to help install, maintain, and provide customer service to patrons who are enjoying historic racing.”